(Reuters) - The S&P 500 will trade near current record levels at year-end, according to a Reuters poll of market strategists that suggests the AI rally is losing steam as investors wait for a widely-expected U.S. central bank interest rate cut next month.

The benchmark S&P 500 will end 2024 at 5,600 points, according to the median forecast of 41 equity strategists, analysts, brokers and portfolio managers collected Aug. 8-20. The index closed at 5,608 on Monday.

In a May poll, market strategists expected the S&P 500 to trade nearly unchanged for the rest of the year but the index has climbed over 5% since then.

Overall, the S&P 500 has surged around 18% so far in 2024, backed by sharp gains in Nvidia ( NVDA ), Microsoft ( MSFT ) and other Wall Street heavyweights as they race to dominate emerging AI technology.

The U.S. stock market has turned volatile in recent weeks, partly on recession fears, but also related to the unwinding of large leveraged positions in markets as a result of a sudden, sharp rise in the Japanese yen, used as a funding currency.

Fading recession concerns helped boost stocks last week, marking their biggest weekly gains since November.

Investors have also become nervous about massive spending by Google-parent Alphabet, Microsoft ( MSFT ) and Meta Platforms ( META ) to build their AI infrastructure.

"The AI sugar high is fading and the market is coming to grips with a possible slowdown in GDP," said Synovus Trust portfolio manager Daniel Morgan, warning as well of "little room for error" due to stretched valuations.

The S&P 500 is down about 1% from its record high close on July 16.

Nvidia's ( NVDA ) stock has surged over 150% in 2024, and analysts expect the chipmaker's quarterly net income to more than double when it reports its results next week, according to LSEG.

The S&P 500 will trade at 5,900 points by the end of next year, a 5.2% gain from Monday's close, the survey showed.

Stock market strategists usually struggle to accurately predict exact levels for indexes, but their forecasts offer a glimpse of sentiment across Wall Street and Reuters poll medians often correctly predict the direction of trading.

A neck-and-neck race between former President Donald Trump and Vice President Kamala Harris means additional uncertainty for investors ahead of the Nov. 5 U.S. presidential election.

As well, turmoil in the Middle East and uncertainty over how many interest rate cuts the Fed will deliver make it particularly difficult right now to forecast the stock market, said Chase Investment Counsel President Peter Tuz.

Money market traders mostly expect a 25 basis point rate cut at the Fed's September policy meeting, with a total of at least 75 basis points in reductions by year end, according to CME Group's FedWatch.

Asked by Reuters, over half of poll respondents said a stock market correction of at least 10% is likely by the end of September. More than half predicted corporate earnings would beat expectations through the end of 2024.

While the AI rally has benefited the U.S. stock market's most valuable companies, much of the market has lagged.

The median S&P 500 stock has gained around 9% this year, while the S&P 500 consumer discretionary, real estate and materials sector indexes have languished with year-to-date gains of about 5% each.

Following this year's rally, the S&P 500 is trading at 21 times expected earnings, compared to a 10-year average of 18, according to LSEG.

Goldman Sachs lowered the odds of a U.S. recession in the next 12 months to 20% from 25% following recent upbeat jobless claims and retail sales reports.

Fed Chair Jerome Powell will speak at the economic symposium in Jackson Hole on Friday, with investors keeping an eye out for any signs of acknowledgment of a rate cut in September.

(Other stories from the Reuters Q3 global stock markets poll package)